Soochow Securities: Domestic and Overseas Markets Align for Growth, Focus on Recovery in Global Construction Machinery Sector

Stock News12-08

Soochow Securities has released a research report highlighting the recovery trajectory of the construction machinery sector.

**Domestic Market Outlook** Based on equipment replacement cycles and fleet size calculations, China's excavator demand is projected to grow at an annual rate exceeding 30% from 2025 to 2028, peaking at 250,000 units by 2028. However, 2025 sales underperformed theoretical estimates, attributed to funding constraints delaying demand conversion. Small excavators dominate current sales due to ample central government bond allocations, while medium/large excavators face weaker local government funding for projects. Consequently, this cycle is expected to feature a gradual but prolonged recovery.

**Overseas Market Dynamics** Global excavator demand has declined for four consecutive years (2022–2025) after peaking in 2021, primarily due to the Federal Reserve’s interest rate policies. With anticipated Fed rate cuts, overseas demand is poised to rebound in 2026, aligning with domestic recovery and creating synchronized growth.

**Sector Performance** From January to October 2025, China’s excavator sales rose 19.6% year-on-year, while crane sales varied (-2.8% for truck cranes, +22.9% for crawler cranes). Export excavator sales grew 14.5%, signaling moderate recovery. Overall sector revenue increased 12% YoY in the first three quarters of 2025.

**Profitability Improvements** Capacity utilization rates, previously low (e.g., 42% for Soochow Securities’ case study in 2024), are rebounding with demand recovery, enhancing fixed-cost absorption. Cost-cutting measures further boosted net margins: Soochow Securities, XCMG, and Zoomlion saw YoY increases of 2.4, 0.1, and 0.8 percentage points, respectively.

**Investment Recommendation** Positioned at the early stage of an upcycle, the sector offers 20%+ earnings growth potential over the next 2–3 years, with core stocks trading at 10–16x 2026 P/E. Strategic allocation is advised.

**Risks** Industry cyclicality, delayed infrastructure/housing projects, policy uncertainties, and geopolitical tensions.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap
Leave a comment